The Shifty gang who go in search of 'blue-sky' thinkers

Club's persistence with an old favourite is paying off, writes Emma Thelwell

The Shifty Investment Club might sound a bit dodgy. In reality, the club has won three £1,000 quarterly prizes in The Daily Telegraph Barclays Stockbrokers competition and finds success through well researched, long-term investments.

Club members prefer to seek out little-known companies with blue sky ideas, and stick with them, whatever the weather.

They chose their club name because its 11 members work shifts in the information technology (IT) department of a bank. It has been running for nine years and is based in Northwich, Cheshire.

The last time The Daily Telegraph caught up with the club, it had just won the competition for the final quarter of 2005 and members were mulling over what to do with the £1,000 prize money.

True to form, the club ploughed its £1,000 into an old favourite: Bioprogress. The maker of coatings for drug capsules, Bioprogress is listed on the Alternative Investment Market (Aim) and is the club's main holding. Since it listed on Aim in 2003, it has attracted investors with a product called XGel, a replacement for the gelatine used in oral-dose medicines, which is biodegradable and water-soluble.

Mark Edgeley, club chairman, said: "We've been investing in Bioprogress for a couple of years and it has taken a lot longer than some of our other investments to take off.

"Now, finally, it has started to deliver."

The share price of Bioprogress steadily slipped from around 57p at the beginning of the year, to around 35p in August. The club bought into the group at 44p a share and endured the "very bad first quarters" with good humour. During this time, the company appointed its third finance director in just four months.

However, throughout September the share price picked up, going on to hit an annual high of 66.5p in recent weeks. The company released encouraging six- month interim results, reporting a climb in gross profits from £600,000 in the first half of 2005, to £2.2m in the first half of this year.

This week the shares were trading around 60p each. Bioprogress is the only one of the club's three holdings which has seen growth in recent months. Its two remaining investments, 3DM Worldwide and Torotrak, have fared less impressively.

Oxfordshire-based plastics specialist 3DM, also listed on Aim, has been a popular 'blue sky investment' in recent years thanks to its patented 3DM Powder Impression Moulding (PIM) process – which creates a recyclable plastic product for the automotive industry.

However, the group's share price has been falling steadily from around 43p in November last year, and the shares were trading around 8.75p each this week. In 3DM's interim results for the six months to the end of June, the company admitted operating losses of £2.2m.

Fortunately, 3DM accounts for just 10 per cent of the Shifty Investment Club's portfolio, which is currently worth about £9,500. The club bought 3DM shares a few years ago when they were trading at around 50p and it managed to lock in some profits by selling a portion of its stake when the shares were hitting highs of 150p back in 2004.

The club has been trading in and out of Torotrak since picking up the shares at 44p each during the dotcom boom. Torotrak, a FTSE TechMARK company, designs and develops transmissions for large lawnmowers.

Mr Edgeley said: "Torotrak is another one of our dotcom era, blue sky disasters, but we believe that one day it will come good."

Similarly to 3DM, the shares in Lancashire-based Torotrak have suffered since 2004. Despite reporting a four-fold increase in revenues in May, the company reported that its full-year pre-tax losses had risen to £6.2m from £6.1m last year, as administrative costs increased. The shares were trading around 26.7p this week.

The club keeps a close eye on its investments by using an online portfolio, and Mr Edgeley is confident that despite the setbacks, the club "stands a good chance of winning another quarter in the competition".

To read more about the competition leaders and view the Investment Club top 10 league table and top 10 stock picks, visit our competition page.

Investment clubs that fancy their chances in the quarterly rounds of the 2006 The Daily Telegraph/Barclays Stockbrokers Investment Club Competition can find more information, including terms and conditions and rules, and download an entry form here, or call 0141 352 3620.